Exploring Determinants of the Firm Boundary for Swedish Multinationals

Abstract

This paper empirically examines the foreign internalisation decision of multinational corporations. The purpose of the paper is to identify determinants of the firm boundary, where within-boundary production takes the form of foreign direct investments (FDI) and outside-boundary production takes place through international outsourcing, with reference to recently developed general-equilibrium trade theories incorporating firm behaviour. The empirical investigation is performed for 2246 multinationals production engagements in 148 foreign countries under the 1997 to 2006 period. The primary contribution of the paper is the investigation of firm behaviour per se instead of industry level implications of firm behaviour.Foreign Direct Investment; International Outsourcing; Firm-level Evidence